Thursday, May 19, 2011

Making Stuff Up: Myth of Uncertainty

Businesses tell financial reporters that they aren’t hiring because of “uncertainty” about the future economy.  “Uncertainty” is one of those code words, like “welfare queen” that all of the insiders understand but won’t explain to the general public.  “Uncertainty” is code word for the possibility Barrack Obama will be re-elected and the Democrats will gain seats in the Senate and House in 2012, and businesses will no longer be able to count of outrageous corporate tax loophole rip-offs, and will face regulation of outsourcing of American jobs and controls over destroying America’s air and water. In short, the prospect they’ll have to reign in unfettered corporate greed for another four more years. That is what they mean by “uncertainty.”  Many American businesses are holding the country economic hostage.

One of business’s biggest complaints is rapidly rising health insurance costs, which really are enormous. They say they are “uncertain” about health care costs.  They blame those costs on President Obama.  But why have health insurance costs skyrocketed?  Because their business friends who run private health insurance companies are intent on ripping off private individuals and businesses as long as possible before the Affordable Health Care Act provisions kick in 2014. About that they are certain. They will kick in.  There is no realistic hope House Republicans will be able to reverse the Democratic health care plan.  Starting in 2014 if an employer doesn’t offer insurance, workers will be able to buy insurance directly in an Exchange -- a new transparent and competitive insurance marketplace where individuals and small businesses can buy affordable and qualified health benefit plans.  Exchanges will offer people a choice of health plans that meet benefits and cost standards which will put an end to gouging small business owners and private individuals.  At that point there will be few incentives for health insurance companies to continue attempting to squeeze American businesses or individuals, because everyone will have less costly options. At least that's what the Congressional Budget Office predicts.  About that there is little uncertainty. What IS uncertain is how much they will be gouged by their friends in insurance companies from 2011-1013. 

There is actually little uncertainty about most of the economy, which all economists agree is gradually recovering. The only question is how rapidly.  To be sure, it is not improving rapidly enough, but the recovery is clear from nearly all measures, even employment which lags behind other measures. (see famous Rachel Maddow "Bikini" unemployment chart that has been updated. Red refers to Bush administration figure, Blue to Obama administration figures).

So what’s all the “uncertainty” we keep hearing about. In reality there IS uncertainty in the housing and construction markets because of the ghastly irresponsible home loan fiasco foisted off on America by Wall Street.  As a result, there actually IS uncertainty in many retail businesses that count on consumers who are no longer able to buy as much as before because of losing everything on those disastrous loans, and construction workers laid off from the home construction business. Much more needs to be done to address this situation by Congress and the President. 

Many businesses make products that are not sold to everyday consumers like you and me, such as tractors, pipes, wire, Ethernet cable, commercial cleaning products, office supplies, road graders, packaging and containers, paper and paper products, rubber and plastics, yet those businesses are not hiring either. Many companies specialize in services to large and small companies, not individuals, like Wi-Fi, Ethernet and “cloud” networking services, but their hiring is also anemic. Wholesale trade accounts for 22% of total US sales, manufacturing 19%, finance and insurance 13%, and construction 7%, (the total is more than 60%), while retail trade accounts for 14%.   Why not make more stuff that doesn’t count on consumer spending, like rebuilding American infrastructure? Time to invest in America!

Many larger businesses are sitting on huge surpluses, which they are using to purchace their own stocks, thereby artificially inflating their value, instead of expanding and hiring more workers. By inflating their own stock values, they and their stock-holders get rich in the short term without doing anything, and not a single person is hired.  

Banks are sitting on jillions of dollars and not lending it to business that actually need loans to expand their businesses, but those banks make oodles of more money on gambling on Credit Default Swaps and other Derivatives, so they don’t need to loan to businesses to make a lot of money.  Why invest in a business with a 10-20% investment return when you can gamble and make 150% on stuff that doesn’t involve any products or services.  It’s betting on how much money someone will make or lose by a given date without the banker having to dirty his or her hands with actual products or services that are beneficial to anyone else. If they didn’t have this bizarrely unethical way of making money, they would be forced to invest in their own country's future instead of lining their own pockets.

You might assume businesses would build more stuff and provide more services if they could make money doing so, but look at it this way.  Most businesses don’t need to hire more full-time workers, at least in the near term.  As long as they can underpay current workers who have no choice but to accept meager pay (why do you think Republicans are attacking unions?), hire part time workers with no benefits (including illegal immigrants), force existing workers to work overtime to avoid hiring more workers, they can continue to make out financially without hiring. Remember, blood out of a turnip?

Many corporations avoid hiring American workers nearly altogether by outsourcing their manufacturing or services to China, India, Korea or the Philippines.  The strategy is to squeeze every ounce out of American workers for another 18 months, thereby assuring stinky employment figures and promoting a sense of national economic angst running up to the 2012 presidential election.  

That way the Koch brothers, Karl Rove and the Chamber of Commerce figure, they have a shot at defeating Barrack Obama in 2012.   If they succeed in electing Mitch Daniel, Tim Pawlenty or Jon Huntsman, they figure they’ll have it made. Their outrageous corporate tax cuts will be secure, they can continue to disenfranchise American workers with impunity and no one will monkey with their ability to make billions of dollars betting on other people’s finances, further undermining the American economy. Then, they figure it’ll be time to start hiring a few more Americans so it looks like any employment turn around was due to getting rid of Obama.

Many of these people didn’t major in business in college, they majored in cynicism, What is a cynic? A man who knows the price of everything and the value of nothing.”  Oscar Wilde

1 comment:

  1. The nice part about being a pessimist is that you are constantly being either proven right or pleasantly surprised.
    George F. Will